Dollar firms as traders weigh economic data

Shafaq News /The dollar firmed on Friday, on track for its fifth straight weekly gain, as investors assessed the latest economic data and firm expectations of the Federal Reserve cutting rates in June.

The dollar index, which measures the US currency against six major rivals, was up 0.13% at 104.40 on Friday, having eased 0.4% on Thursday. The index is on course to eke out a 0.3% gain for the week, its fifth in a row.

The dollar slipped on Thursday after mixed US data, with retail sales falling more than expected in January, while a separate report underscored labor market tightness.

"We have seen how US activity is starting to show some softening and the USD momentum is taking a breather," said Christopher Wong, a currency strategist at OCBC in Singapore.

"A softer read on PPI today should see USD ease. But overall market expectations on the timing of the first Fed cut and magnitude of the cut will continue to drive volatility in FX markets."

A string of strong US data has quashed any lingering expectations of early and deep rate cuts from the Fed, with traders now pricing in an 80% chance of a rate cut in June, according to the CME FedWatch tool.

Markets had initially priced in March as the starting point of the Fed's easing cycle.

Traders now expect 94 basis points (bps) of cuts this year, nearer to the Fed's own projection of 75 bps of easing and drastically lower than the 160 bps of cuts priced in at the end of 2023.

Federal Reserve Bank of Atlanta President Raphael Bostic said on Thursday that while the US central bank had made a lot of progress lowering inflation pressures, ongoing risks mean that he was not yet ready to call for interest rate cuts.

(Reuters)